1. Market-Based Measures
Presented by WG 5 Co-Rapporteurs:
Stephen Seidel
Michael Rossell to
ICAO Environmental Colloquium
April 9-11, 2001

2. Overview Why emissions from aviation need to be addressed?
What are market-based measures and why are they attractive?
What are the key conclusions from CAEP’s work to date?
What are the next steps?-- draft elements of a resolution on next steps.

3. Basis for Action
Aviation and the Global Atmosphere (IPCC, 1999) assesses aviation’s contribution to climate change:
Aviation currently 2% of global CO2 emissions and 3.5% of radiative forcing
Projected emissions growth of 3% annually
Emissions growth exceeds likely progress in new technologies
Other emissions (Nox, contrails and cirrus cloud formation) could also play a significant role but science more uncertain.

4. UNFCCC and Kyoto Framework
Framework Convention agreed to in 1992 and entered into force on 21 March 1994.
“stabilization of greenhouse gas concentrations at a level that would prevent dangerous anthropogenic interference with the climate system.”
Kyoto Protocol -- agreed to in 1997, but has not entered into force:
developed nations to reduce ghg emissions
aviation bunker fuels to be limited or reduced through ICAO

5. Responds to A-32 Mandates
Calls on the Council “….to maintain the initiative in developing policy guidance on all aviation matters related to the environment….”
Calls for the Council through CAEP “...to study policy options to limit or reduce the greenhouse gas emissions from civil aviation….”
Requests the Council to refine the guidance on emission-related levies

6. Why Market-Based Measures?
More flexible than traditional certification standards -- lets the market work
Provides price signals -- internalizes environmental costs
Provides incentive for technological innovation
Works to minimize costs of achieving reductions
Incorporated into Kyoto Protocol to reduce costs

7. Market-Based Measures
1. Taxes and Charges
levy could be placed on amount of fuel or emissions
taxes: revenue goes to national treasury
charges: revenue used to defray the costs of providing facilities and services for civil aviation
increased costs provide incentive to reduce emissions
can be designed to be “revenue-neutral”
used at airports in Sweden and Switzerland for local air quality

8. Market-Based Measures
2. EMISSIONS TRADING
sets cap for total emissions
firms can reduce emissions beyond what is required and sell “excess reductions” OR
reduce less than required and buy excess reductions from others
achieves reductions at lowest possible cost
incorporated into Kyoto Protocol
used in US to control acid rain at much lower cost than traditional standards
trading across sectors (open) v. trading within aviation (closed)

9. Market-Based Measures
3. Voluntary Initiatives
voluntary agreements to reduce emissions
could set either emissions or efficiency target and/or identify menu of actions
not legally enforceable, but typically requires periodic reporting of progress
Used to reduce ghg emissions in some sectors in US, Netherlands, Canada, UK, EU and Australia.

10. CAEP 5 Conclusions
Open emissions trading -- cost effective solution in the long term tied to Kyoto entry into force.
Further work needed to develop system
Voluntary mechanisms -- could be a first step to encourage near-term action
guidelines should be developed
Levies -- further studies and guidance should be developed for consideration in shorter term.

11. CAEP 5 Conclusions
Impacts on developing countries of market-based measures needs to be fully considered
initial work looked at: global application; developed countries only; and flights to and from developed countries.
further analysis required
greater developing country participation encouraged

12. Draft Elements of an Assembly Resolution
Support continued work by Council to develop policy direction for States and to develop concrete proposals.
1. Voluntary Mechanisms:
encourage short-term actions to limit or reduce emissions
Council to facilitate action by developing guidelines
cont….

13. Draft Elements of Resolution
2. Emissions-Related levies
Confirm existing ICAO guidance (9 Dec 1996)
Urge Council to carry out further studies and develop further guidance
Charges should be based on cost of mitigating environmental impacts of emissions
cont….

14. Draft Assembly Resolution
3. Emissions Trading
Implementation of an open emissions trading regime would aim for first commitment period ( ) subject to entry into force of Kyoto.
Request Council to develop urgently the guidelines for open emissions trading